The duty of care requires a fiduciary to act with prudence, diligence, competence, preparation, and informed judgment. A fiduciary is not required to guarantee outcomes. A fiduciary is required to use a responsible process.

The duty of care governs investigation, decision-making, recordkeeping, delegation, supervision, risk review, and preservation of entrusted property. A fiduciary who acts without adequate information, fails to consider foreseeable risks, or neglects reasonable oversight may breach the duty of care even if no actual harm results.

A fiduciary must exercise reasonable care, skill, prudence, and diligence when administering entrusted authority, property, records, or interests for the benefit of another.

No fiduciary decision should be made without:

1. identifying the authority source;
2. reviewing relevant facts;
3. considering foreseeable risks;
4. documenting alternatives considered;
5. preserving the decision record; and
6. acting within fiduciary capacity.

Where any of these steps is missing, the fiduciary’s decision lacks the procedural foundation required for prudent administration.

The duty of care is fundamentally about process, not results. Prudence is judged by the fiduciary’s conduct at the time of decision, not by hindsight. Key elements include:

• Prudence as Process: A fiduciary must follow a deliberate, informed decision-making process appropriate to the nature and significance of the action.
• Reasonable Care Under the Circumstances: The standard is objective—what a reasonably prudent fiduciary would do in similar circumstances, considering the fiduciary’s special skills or expertise.
• Informed Decision-Making: A fiduciary must gather and evaluate relevant information before acting, including seeking expert advice when warranted.
• Duty to Investigate: A fiduciary may not rely on ignorance or incomplete information; reasonable inquiry is required.
• Duty to Monitor: Ongoing supervision of investments, agents, and entrusted property is essential; a fiduciary cannot delegate without oversight.
• Delegation and Supervision: Where delegation is permitted, the fiduciary must exercise care in selecting, instructing, and monitoring the delegate.
• Preservation of Property: A fiduciary must take reasonable steps to protect entrusted property from loss, waste, or misappropriation.
• Risk Management: Fiduciaries must consider foreseeable risks, including market risk, administrative risk, and conflicts of interest, and manage those risks prudently.
• Distinction Between Bad Outcome and Breach of Care: A poor result alone does not necessarily prove breach; defective process, neglect, reckless indifference, or uninformed action may support breach analysis. Conversely, a good outcome does not cure a careless process.

• Restatement (Third) of Trusts § 76 – A trustee has a duty to administer the trust in good faith and in accordance with its terms and purposes.
• Restatement (Third) of Trusts § 77 – The trustee has a duty of prudence, requiring reasonable care, skill, and caution in administering the trust.
• Restatement (Third) of Trusts § 80 – A trustee may delegate duties but must exercise reasonable care in selecting, instructing, and monitoring delegates.
• Uniform Trust Code § 801 – Upon acceptance, a trustee shall administer the trust in good faith, in accordance with its terms and purposes, and in the interests of beneficiaries.
• Uniform Trust Code § 804 – A trustee shall administer the trust as a prudent person would, considering the purposes, terms, distribution requirements, and other circumstances of the trust.
• Uniform Trust Code § 807 – A trustee may delegate investment and management functions but must exercise reasonable care in delegation and supervision.
• Uniform Prudent Investor Act § 2 – The standard of care for a trustee’s investment and management decisions is prudence in the context of the entire portfolio, not individual investments.
• Uniform Prudent Investor Act § 9 – A trustee may delegate investment and management functions but must exercise care, skill, and caution in selecting and monitoring agents.
• Scott and Ascher on Trusts – The duty of care requires the trustee to act as a reasonably prudent person would under like circumstances, with attention to the trust’s purposes and beneficiaries’ interests.
• Bogert, The Law of Trusts and Trustees – The duty of prudence encompasses care, skill, and caution; a trustee may be surcharged for negligent administration even without self-dealing.
• Pomeroy, Equity Jurisprudence – Equity requires fiduciaries to exercise good faith and ordinary care in the discharge of their duties, with liability for gross neglect or willful default.

These authorities reflect broadly recognized fiduciary principles. Specific application depends on jurisdiction, governing instruments, facts, fiduciary role, and competent professional review.

The duty of care applies across all fiduciary relationships and institutional contexts:

• Trust Administration: Trustees must conduct investment reviews, preserve trust assets, maintain accurate records, and assess beneficiary impact before making distributions or exercising discretionary powers.
• Agency: An agent must act competently within the delegated scope of authority, using reasonable diligence and care to carry out instructions.
• Corporate / Organizational Governance: Officers and directors must make informed business judgments, document their decision-making process, and avoid reckless or uninformed actions.
• Institutional Systems: Decisions require documented review, review logs, periodic audits, and supervisory oversight to ensure consistent application of care.
• Delegation: A fiduciary may delegate where permitted, but must select agents prudently, provide clear instructions, and establish monitoring procedures to oversee delegated functions.

• Authority reference for each decision.
• Decision memorandum explaining the reasoning and facts considered.
• Fact review record, including sources of information.
• Risk assessment, identifying foreseeable risks and mitigation measures.
• Alternatives considered and reasons for selection.
• Expert consultation records, where applicable (reports, emails, notes).
• Delegation records, including selection criteria, instructions, and acceptance.
• Monitoring records, showing periodic review of delegate performance.
• Asset review logs, including valuation and condition assessments.
• Beneficiary communications regarding decisions or actions.
• Accounting records linked to asset management and disbursements.
• Signature capacity records, identifying the person acting and capacity.

Core rule: Care is demonstrated by record. Without documentation of prudent process, the fiduciary’s actions are difficult to defend.

• Acting without investigation of relevant facts.
• Relying only on memory instead of documented analysis.
• Failing to document decisions, alternatives, or reasoning.
• Delegating without supervision or periodic review.
• Ignoring foreseeable risk, especially risk of loss or mismanagement.
• Confusing discretion with carelessness – discretion requires informed judgment.
• Failing to preserve entrusted property through insurance, security, or segregation.
• Acting outside the scope of authority without proper amendment or consent.
• Treating good intentions as sufficient to satisfy the duty of care.
• Failing to review changed circumstances that may require different decisions.

KLI teaches the duty of care because fiduciary governance requires competent process, documented judgment, and disciplined administration. Care is proven by record, review, and responsible procedure. Without the duty of care, fiduciaries could act arbitrarily, neglectfully, or without accountability, undermining beneficiary protection and institutional reliability. The duty of care ensures that fiduciary action reflects reasoned, responsible, and reviewable conduct.

• What Is a Fiduciary? (KLI-KL-FID-001)
• Fiduciary Duty Explained (KLI-KL-FID-002)
• Duty of Loyalty (KLI-KL-FID-003)
• Duty to Account (KLI-KL-FID-004)
• Duty of Impartiality (KLI-KL-FID-006)
• Conflicts of Interest (KLI-KL-FID-007)
• Trustee Duties (KLI-KL-TRUST-002)
• Trust Property and Asset Management (KLI-KL-TRUST-003)
• Equity Follows the Law (KLI-KL-EQ-001)